Draghi puts off interest rate reversal
The ECB will stick to its loose monetary policy for the time being, maintaining the benchmark interest rate at its record low of zero percent and leaving open the possibility of extending the bond-buying programme. ECB head Draghi justified the decision pointing to the euro's fluctuating exchange rate. Has the time for higher interest rates come?
Eurozone needs return to normality
The entire Eurozone is ready for an end to quantitative easing, Die Welt is convinced:
“The European economy is booming, and even Italy has put the recession behind it. Any risk of deflation - that is a feared widespread drop in prices - has vanished. When taxes fill the treasury and business is brisk, it's easier to adapt to a change in the interest rate. But it's not only German savers who should desire a return to normality in monetary policy. Precisely now that the situation in the Eurozone is finally looking better, the ECB should take precautions for the future. If interest rates remain at zero forever it will lack ammunition to deal with the next crisis, if and when it comes.”
Germany and Austria not the centre of the world
Draghi's decision to keep the cheap money flowing is right, Der Standard believes:
“In Germany and Austria the pressure is growing for Draghi to finally start winding down the programme. Looked at from the German or Austrian perspective, this demand makes sense: both countries' economies are in good shape, unemployment is low or dropping and inflation is near the two percent mark, where the ECB wants it to be. But the central bankers don't make monetary policy for just two but for nineteen countries. In southern Europe, in Spain, Italy and Greece, the recovery is more fragile. Unemployment is still high and has even risen in Italy. No one knows what will happen when the bond-buying stops. If the ECB pulls on the brakes too soon it could smother recovery in the South.”
Draghi should be clearer on end of QE
The ECB should state clearly what would prompt it to change its monetary policy, the Financial Times argues:
“In the past few months, Mr Draghi has trod a fine line between reassuring investors and governments that the bank is making preparations to exit from QE while still retaining control over the timing. ... Ultimately, central banks build up credibility by being as clear as possible on what they are trying to do, how they are trying to do it and what will trigger them to change monetary policy. On at least the first two of these, Mr Draghi's ECB has done well. He needs to ensure that the bank is equally transparent on the third.”
Central banks need overhaul
La Stampa explains why the central banks must fundamentally rethink their monetary policy:
“The finance systems' current transformation processes and their global interdependency threaten the central banks' ability to keep loans and liquidity under control. Moreover, the central banks' influence on inflation - above all when it comes to ratcheting up the rate of price increases - is curbed by the fact that nowadays prices and wages follow new dynamics that owe much to technological development and forms of competition that didn't exist in the past. As a result the banks need to change their strategies.”